Real estate agents and brokers, landlords and property managers, commercial and residential appraisers, and other professionals in the industry realize that their business, like any other, has risks. But do they fully appreciate the cyber risks they face?
Real Estate Cyber Insurance protects your clients in this sector from the expenses, legal fees, and fines or penalties they could incur in the event of a cyber attack and data breach.
Without such insurance, your clients could suffer a potentially devastating hit to their business—losses from which their revenue and reputations might never recover.
At ProWriters, we field questions about Cyber Insurance for real estate professionals on a regular basis. Here are three of the most frequent and important questions we face, along with our answers on this increasingly critical coverage.
What Insurance Do Real Estate Agents Need?
Real estate professionals have a legal and ethical responsibility to protect the personal information they collect.
If your client in real estate asks, “Do I need Cyber Insurance?” Simply remind them how much personally identifiable information (PII) they gather in order to conduct their business.
Such data includes:
- Physical addresses and email addresses
- Phone numbers
- Bank statements and account numbers
- Mortgage records
- Social Security numbers
- Driver’s license numbers and images
- Insurance policy details
- Wire transfer receipts
In the wrong hands, this information exposes individuals to identity theft, unauthorized purchases, and other fraudulent activity.
Further, real estate transactions are increasingly taking place electronically, “without the buyer and seller ever setting foot in the same room,” as attorney and real estate broker, Elizabeth Whitman notes.
Electronic transfer and cloud storage of data make real estate a tempting target for cybercrime. The FBI heard from 11,677 victims of real estate and rental cybercrime in 2019, suffering $221,365,911 in losses. Unreported incidents means those numbers are likely even higher.
In one high-profile example, First American Financial, a Fortune 500 real estate title insurance company, unwittingly exposed 885 million files in 2019 because of a design flaw in its website.
While real estate agents may have been more concerned about physical damage to a building or housing market volatility in the past, data security risks demand their serious attention, too.
What Are Four Critical Categories of Cyber Insurance?
Because cyber risks include but aren’t limited to threats to personal information, Real Estate Cyber Insurance covers four main potential exposures:
- First-party risks
These are the risks that the affected organization bears. Associated expenses include the potential costs of an IT forensic investigation, repairing digital assets, notifying affected third parties, and communicating through the crisis. Cyber Insurance can also help cover business interruption costs and lost revenue while systems are down.
- Third-party risks
Customers, clients, and vendors of the affected organization are also affected as their data is on the line. When they pursue claims or file lawsuits, Cyber Insurance will help cover legal fees, court costs, and damages, as well as regulatory penalties. It can also cover the cost of providing benefits to affected third parties (for example, ongoing credit monitoring).
These expenses, in certain cases, involve paying ransomware demands made by cyber criminals in order to release encrypted information or operating systems. Many experts still contest whether or not these demands should be paid, which is why it’s best to have a breach coach on board to provide expertise in each specific situation.
- Fund recovery
There are many different ways in which hackers seek to steal money. From accessing a bank account with stolen credentials to tricking a user into sending their own money directly to a hacker through fraudulent instructions, this coverage ensures users have another layer of protection against this theft.
Businesses often greatly underestimate how much they stand to lose when faced with a cyber attack, however, a data breach can cost small and medium-sized businesses $149,000, on average.
Costs in any one of the four categories above could easily ruin a real estate professional. For this reason, their need to carry Real Estate Cyber Insurance coverage is urgent.
How Much Does Cyber Security Insurance Cost?
Like the cost of general liability and professional liability insurance (E&O), the exact cost of Cyber Insurance in the real estate sector varies based on a number of factors.
These factors include:
- The size and type of the insured business.
The bigger the business, the greater the exposure to risk. While no industry is exempt from cyber risks, real estate, as we’ve seen, carries an inherently high risk as transactions often involve an extensive amount of PII.
- The security protocols the business follows.
When businesses adhere to such best practices as data encryption and a strong password control policy, they can lower the cost of premiums. This demonstrates that they’re taking proactive steps to reduce the risk of data exposure.
- The policy limits and size of the deductible.
The more risks a policy covers, the more it will cost. At the same time, higher deductibles will mean lower premiums.
But when weighed against the potentially devastating costs of responding to and recovering from a cyber incident, the cost of Real Estate Cyber Insurance is clearly a wise investment.
We at ProWriters offer comprehensive Cyber Insurance coverage for companies of all sizes. To find out how we can design solutions meeting your real estate clients’ specific needs, schedule a time to speak with us or call us at 484-321-2335.